06/06/2012 World Business Report


06/06/2012

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105 years. Now for the latest financial news with Juliette Foster

:00:06.:00:16.
:00:16.:00:18.

and World Business Report. The headlines: Bailing out the banks,

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new plans from Europe to shift the burden from the taxpayer to the

:00:23.:00:28.

bond holder. And the European Central Bank is expected to leave

:00:28.:00:32.

rates unchanged today as it steps up the pressure on politicians to

:00:33.:00:40.

sort out the debt crisis. Australia posts surprisingly strong growth

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figures thanks to the mining sector. The European Commission will

:00:54.:01:01.

featanage stop the collapse of individual

:01:01.:01:05.

banks from causing chaos throughout the rest of the European financial

:01:05.:01:09.

system. Until now, national governments had used taxpayers'

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money to bailout banks, but the commission is expected to suggest

:01:14.:01:18.

the damage on the banking collapses limited to another group of people,

:01:18.:01:28.
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Bank bond holders. Unsurprising we governments pumped public money

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into domestic banks to protect the assets of depositors. The European

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Commission wants an elected -- to lead banks fail in future without

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troubling t troubling ter. The planners for Bank bond holders to

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take more of the pain. Financial institutions and places like the

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city of London are prepared to buy billions of dollars worth of bank

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bonds every year at lower rates because they know that at the bank

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goes bust, they will get their money from the depositors. But the

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European Commission wants to switch their round so depositors come

:02:07.:02:12.

first in the two. The advantage of this is, at a bank collapses, the

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pain is limited to a few unfortunate financial funds, rather

:02:16.:02:22.

than millions of members of the public. The disadvantages is that

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fewer fund managers will want to buy back bombs at the current rates.

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Appetite towards Bank bonds has reduced because they come more

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risky. They also has the risk of, not only is the rate

:02:37.:02:47.
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recharge going up, the access to funds are at fault. The commission

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is releasing its proposals at a critical junction of banks and

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bondholders. The Spanish bank needs $19 billion of emergency loans.

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There are doubts about the finance of the entire Spanish banking

:03:01.:03:06.

sector. We have a crisis of confidence in the banking sector in

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Spain. To threaten any investors or bond holders at this point is

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dangerous for the capital market. Bond traders have bought a hundred

:03:19.:03:22.

billion euros worth of bank bonds this year. With the new rules in

:03:22.:03:25.

force they will start asking for higher rates of return. The banks

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will have to pass on the high rates in loans to customers. The measures

:03:30.:03:34.

could make banking save before the public but they may also make it

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costlier. As the situation in Europe's banking industry

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deteriorates, policy makers meet to decide on interest rates. They are

:03:50.:03:53.

unlikely to do anything today as Mario Draghi feels the central bank

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has already during its fair share and that politicians need to do

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more. The press conference will be watched for signs of when action

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may come, after the Spanish admission that it has been shut out

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of borrowing from money markets. Let us be cut this point that the

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CBD is making, they are saying they had been standing the tab for too

:04:22.:04:27.

long. It is up to the politicians to do something. They have said

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this before. Why should we be this and this time? We need to see a

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combination of measures. They want to make sure they are not taxing in

:04:38.:04:45.

isolation and the measures are sustainable. If there is too much

:04:45.:04:48.

liquidity they will push up inflation rates. There is a degree

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of urgency now. There are problems and the banking sector and Spain in

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particular but more widely in banks in the eurozone. Action needs to be

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taken quickly. The CBD can take action very quickly. The problem is

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its agenda is to fight inflation. There is a subtle process of

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redefinition going on. They are the end of last resort. It is about

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fighting inflation and enduring financial stability. The CBD is in

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its role winner finds liquidity to banks. It may do more maybe not

:05:32.:05:37.

today, but in the future the situation may deteriorate. They

:05:37.:05:42.

need some kind of joined up banking system which Tyson to what the

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European Commission is proposing. What records can the CBD take

:05:47.:05:54.

without compromising its authority? They will one signals that policy

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makers can move towards structural reforms and closer banking fiscal

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union. These decisions will take time. And we do not have any time.

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The CBD is the only one that can act quickly. This I idea of having

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this a wind down funds, so it takes the onus off the taxpayer, we heard

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one reaction from the report that it was tantamount to bullying.

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could have the opposite effect of raising bond costs. It was all make

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it more expensive for banks to issue bonds. But the idea is to

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dissociate bangs from governments. This is one proposal, there are

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others on the table. Staying with the subject of banks, Germany's

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second-largest bank has had its credit rating cut by the ratings

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agency Moody's because of increased risks from the eurozone and

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concerns about the bank's ability to absorb them. Five other banks

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will also downgraded. Google says it will start sending warnings to

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use is that it believes have been targeted by state-sponsored side

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attacks. The firm says it will bring up a banner highlighting the

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danger when users are locked into the Google account. A link will

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provide suggestions for protecting the data. It would not reveal

:07:25.:07:29.

exactly what would trigger the alerts. An embarrassing launch of a

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new video chat service from the two founders of Maxstoke, a star-

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studded event to show of the technology was hit by technical

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glitches as the screens froze and the video chats between celebrities

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broke down. The entrepreneur has managed to get it working and

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insist it will make the Internet less boring. Some surprisingly

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strong growth figures from Australia. We're talking about

:08:00.:08:10.
:08:10.:08:11.

growth figures. Take us through those numbers. What do they say?

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Quite an impressive set of numbers. The economy has expanded by 1.3% in

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the first three months of this year from the previous quarter. That is

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more than twice the pace analysts were forecasting. Compared to a

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year ago, the economy expanded by 4.3%, much stronger than what

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analysts were forecasting. The economy in the United States grew

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by 1.7% in the same measure while the EU economy has not grown. It

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goes to show that Australia's economy has been quite resilient

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despite the ongoing debt crisis in Europe and the talks about the

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slowdown with China. One analyst I spoke to said that even though they

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have seen some slowing demand for natural resources from China in the

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mining sector, they are still seeing a lot of foreign investors

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willing to invest in that sector, that has been the driving force of

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the growth for the first three months of this year. And the news

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the Australian dollar jumping significantly. Time now for a quick

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look at the financial markets in the Far East. The numbers speak for

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themselves. We have had a bit of a lift. People speak to American's

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